Retirees, imagine what would happen if the U.S. government paid all of your medical bills- anywhere in the world you decided you wanted to go. Now, don’t forget to pinch yourself before you hit the snooze button. Unfortunately, Medicare stops at the border, so if you get hurt injured or fall ill oversees, you will be responsible for your own medical bills. This means that many retirees are hesitant to look outside the comfortable walls of their own country when considering places to retire. Others take out an international health insurance policy prior to travel, especially if they are planning to live abroad for any extended period of time.
It’s pretty simple; if you are of retirement age and you want to travel or live abroad you have to give up your right to free health care; the right that you have earned by working your entire life in the United States, and use your own resources. But, when you make the choice to travel abroad it is already a part of the deal, so you are not allowed to cry. You can argue the point of right or wrong but it will likely not change government policy. Proponents of extending Medicare benefits to retirees abroad cite the fact that they have earned the right to have their medical bills covered, by paying into Social Security for their entire work lives. And, they have a point, but since providing coverage abroad was not a part of the original Social Security Act; the government is not legally obligated to pay. Arguments of morality and propriety fall on deaf ears, and instead we can focus on the economic and political effects of a change in policy.
Professor David C. Warner and his team from the LBJ School of Public Affairs at UT Austin wrote a recent series of papers and a book on the subject of extending Medicare benefits for retirees into Mexico. Dr. Warner cited cost savings to the Medicare trust as a major benefit. Currently, the average Medicare beneficiary in the U.S. costs the Medicare fund about $7,500 per year. If that same person lived in Mexico, the same health care services would cost the U.S. government (if billed correctly) about $4,000 per year. With the population of U.S. citizens over the age of 65 predicted to skyrocket over the next 25 years due to the baby boomer phenomenon, creating the incentive to retire abroad might ease the expected strain on the Medicare trust; which is predicted to be completely bankrupt by the year 2040. Many low income persons of retirement age have already found that living in Mexico is much more affordable than the U.S. You may live fairly well in many parts of Mexico for under $1000 per month, health care costs included. An argument against the change in policy would be that incentivizing retirement to Mexico would create an exportation of retirement age persons and their assets with them. Certainly our economy would be much better off if a retiree’s leisure dollars were spent in the U.S. rather than abroad. Yet, it is doubtful that the cost of health care would be the factor that influenced the retirement plans of higher income retirees. Incentivizing retirement to Mexico would likely exert its greatest influence on lower to middle income retirees which could prove beneficial to both countries. Health care in Mexico is more affordable not because the quality is any less, but because Mexican health care operates with considerably less bureaucratic and legal interference. Land and supportive labor are also substantially cheaper, and there are no “health care middlemen”, i.e. health management organizations (HMO’s) that create substantial costs which do not translate into patient care. Not to say that all health care in Mexico is on par with all health care in North America, but that there are sufficient resources in Mexico whereby a person may receive health care services that are equivalent in both technology and competence to the United States at a 25 to 50% savings. Since the health care delivery system in Mexico is far more cost effective, they are able to provide services at a much reduced premium. By incentivizing retirement to Mexico for lower income U.S. retirees, the U.S. might be able to reduce the impending Medicare crisis, without effecting quality and without creating a tremendous strain on the U.S. economy. Mexican health care would receive a welcome flow of revenue with their greatest challenge being only that of meeting the demand for more qualified physicians and hospitals. This paradigm is no different than any other U.S. company outsourcing its labor to Mexico or China in an effort to stay competitive in the world market.
Dr. Warner has called for a pilot program to study the effect of advancing Medicare benefits to U.S. citizens abroad and we think that it would be a worthwhile effort. The U.S. government cites worries over being able to protect against fraud or in its ability to monitor and credential physicians. But, much the way Medicare contracts with U.S. HMO’s the U.S. government could also contract with a third party health insurance organization doing business in Mexico. A pilot project or a temporary change in policy now will go a long way in protecting the fragile Medicare trust that is about to become a major U.S. political issue.
In the political arena, with the nation divided almost equally along party lines, the absentee vote is being recognized as vital. In fact, the 2000 presidential election was decided almost exclusively by absentee voting in the state of Florida. Certainly, if the absentee vote of U.S. expatriates was organized it may have the clout to generate interest in political change.
Robert H. Page, MD and Curtis P. Page, MD are authors of the MEXICO: Health and Safety Travel Guide and the Healthy Traveler Regional Series.